Advertisers’ Dilemma In Online Video — Reach Or Frequency?

Digital advertising is far too big for marketers to ignore. But whether or not the web can have the widespread reach of TV is still a matter for debate.

That’s a particularly pressing issue now, ahead of this spring’s “upfront” ad sales negotiations. Online giants like YouTube and Yahoo are ramping up digital offerings in hopes of luring a piece of ad budgets that typically flow to television.

In a note to investors last week, RBC Capital Markets analyst David Bank poured cold water on the idea that online video would draw much money from traditional television anytime soon, arguing “its all about reach.”

“Online video consumers tend to represent a very concentrated and somewhat limited subsection of consumers,” Mr. Bank said. “Advertisers will tend to reach the same small group of consumers time and time again, with the identical message.”

Others disagreed. “If you just talk about TV versus desktop web, TV is going to produce a larger reach,” said Andrew Lipsman, vice president of marketing and insights at comScore. But if you look at digital as desktop, smartphone, and tablet all together, the reach becomes more powerful, he said.

“Most of our clients are trying to use digital to expand to reach beyond the audience they reach with TV,” said Randall Beard, global head of advertiser solutions at Nielsen.

In absolute terms, television’s reach is hard to beat. There are 115.6 million TV homes in the U.S. and 294 million persons age 2 or older live in those homes, a 1.6% increase from last year, according to Nielsen. In comparison, between desktop and mobile, the top 25 web properties like Google, Yahoo, and Facebook reach an average 46% of the 243 million person digital population, according to comScore.

In February, 182.4 million people watched web video, according to comScore. That’s a big number, but compared to TV it looks small.

Still, demographics matter to marketers. People aged 18 to 34, the group that marketers often pay a premium to reach, spend 44% more time per viewer watching online video and 36% more time watching YouTube than the average internet user, according to comScore.

As Mr. Beard puts it, TV has wider reach – networks can expose more people to an ad campaign. But because younger people tend to watch less TV, the web offers advertisers the opportunity to reach that audience with more frequency, he said.

Ad buyers say that TV viewership has also fragmented out to more places like web and mobile, though TV remains a necessary component for many advertisers.

“We look at the best ways of reaching our target whether it’s on a PC or tablet or a 65-inch screen at home,” said John Muszynski, chief investment officer at Spark, an ad buyer.

Mr. Bank’s skepticism may be backed up by the slow pace of change. What money has moved into online video is coming mostly from other budgets such as print and display, according to media buyers and marketers.

Still, given the amount of quality programming now showing up on Web outlets, things are likely to eventually shift. Indeed, in terms of share of total ad spending, eMarketer recently predicted that digital would pass TV by 2018. By then, the number of people watching online video is likely to be more than a “subsection” of the audience.

Comments (1 of 1)

The comparisons between TV reach potential to the so-called "subset" viewership on digital media is only valid when standard TV programming is considered.

Content for Mobile and PC/Tablet form factors has not yet been optimized to the dictates of the digital user experience; it's a question of right-sizing the content in order to fight for mindshare in the New Media channels.

When this content disparity is resolved, and only then, could like-for-like audience measurement comparisons be sensibly made.

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